When considering if making $20 dollars an hour is a good wage, there are many factors that need to be considered.
Let’s break things down and answer any questions you may have to find out if $20 an hour is a comfortable wage for living in America.
When determining if 20 dollars per hour is a good wage, there are additional factors to consider, as in the USA, States, Counties, and Cities are allowed to set minimum wage rates. The average wage per state is determined by geographic factors such as the cost of living and demand for work in a particular area.
If we consider minimum wage, out of the 50 States, only 5 States have a minimum wage of 14 dollars per hour or higher. The highest is Washington DC at $15.20, so in this sense, $20 per hour could be considered a livable wage. Although, if we look at the median weekly earnings per person in the US over the first quarter of 2022, this cleared $1000, and as a 40-hour week earning $20 amounts to $800, this falls below the median value.
Although, this doesn't necessarily mean $20 an hour isn't a good wage, and the truth is that earning $20 per hour cannot be assigned to all 50 States as a “good” wage.
To continue if, for example, you worked for 8 hours per day for 52 weeks per year, your annual income before tax will be $41,600. If living in rural areas, or areas where you'll pay 0% state tax, such as Alaska, you'll most likely be fine to save money, go on holidays, and feel financially secure.
On the flip side, if you're living in an urban area such as New York, leading a City life, and paying in excess of $2,000 state tax, this won't allow you to live the upbeat lifestyle this demands, and most likely you'll be living from paycheck to paycheck, requiring double this yearly income for a comfortable lifestyle.
The US has had an income inequality issue for a long time, and determining what is a good wage is not clear-cut. The median individual income in America was $44,225 in 2021, so in theory, a salary above this amount could be deemed a good wage. On the flip side, The federal minimum wage in the US has been $7.25 per hour since July 2009, with full-time workers making roughly $15,000 per year. So compared to this, the median income of $44,225 is an extremely good wage!
Determining a good wage is subjective, and if your salary supports your lifestyle, it’s a good salary.
Additionally, looking forward, In 2023, the federal minimum wage is expected to rise by 4.6%, although depending on the locality of workers, this may be slightly higher or lower. Even after this wage increase, in almost all States and Cities, $20 per hour will still be above the minimum wage.
If you're working full-time hours of 40 hours per week, being paid for 52 weeks per year, then It's possible to live off of 20 dollars an hour wherever you are living in the United States. However, depending on your financial needs, places like Las Angeles, New York, and other built-up areas will require a higher wage to sustain an average lifestyle.
Supporting a family while earning $20 per hour is entirely possible in America, but your quality of life depends on location and cost of living, taking estimated housing and food costs into consideration.
In lower-cost locations such as Alabama and North Carolina where the cost of living is about 4% lower than in the average US City, then you'd be fine supporting children and teenagers while sometimes treating yourself. Yet, if you're living in an expensive area such as New York or California, which are among the top 5 most expensive Cities to live in America, you'll most likely need to cut your life costs, and spending habits, and consider your family's needs above your own. The key is to have a balanced approach to your standard of living.
You can comfortably own a car making $20 per hour, but you'll also need to manage your finances, taking into consideration monthly payments, interest, and also set some ground rules, such as monthly payments not exceeding 10% of your monthly pre-tax income, which, if working 40-hour weeks and earning $3,467 per month would be $346.7.
You might also want to avoid payment plans exceeding 48 months. Also, additional costs, such as location, supporting a family, and living expenses could alter your choice of which car to purchase.
There are many factors to take into consideration when questioning if $20 per hour is enough to buy a house in America.
The cost of a house in New York is going to be drastically higher than the cost of a house in Iowa, with New York having over double the median home price, monthly mortgage payments, and income-to-mortgage ratio. So, location is key when considering buying a house while making $20 per hour. Additionally, you'll also have to analyze your income, debt, monthly expenses, credit history, and other homeowner costs, to be able to gauge if $20 an hour is enough to buy a house.
To understand your hourly wage, take the number of hours worked and multiply them by 20. For instance, if you work 8 hours a day, then 8×20 equals $160 a day, before tax.
To understand your weekly wage, take your daily wage and multiply this by the days of the week you've worked. For example, if you earn $20 per hour and $160 per day, and work for 5 days per week, then 160×5 equals $800 per week, before tax.
To understand your wage per fortnight, If you're earning $20 per hour working 40 hours per week over 52 weeks per year, then your yearly wage will be $41,600. So, divide this number by 24, which equals $1,733.3 every fortnight, before tax.
To calculate your monthly wage when earning $20 per hour, you'll need to divide your annual wage by 12. So, assuming you work 40 hours per week over 52 weeks per year, this adds up to $41,600 per year and divided by 12 equals $3,467 per month.
To understand your annual wage, you'll need to multiply your hourly pay of $20 by the hours per week and the number of weeks per year. Let's assume you work 40 hours per week for 52 weeks per year, or more realistically, work for 50 weeks with a paid leave for 2 weeks. So, 20x40x52 equals your gross pay of $41,600. Breaking that down further, that's $160 per day, 800 per week, and $3,467 per month.
Next, we have to factor federal taxes into the equation, and assuming you're filing as a single filer, then as of 2022, $41,600 falls into the income tax bracket between $10,275 to $41,775, which is taxed at $1,027.50 plus 12% of the excess over $10,275 ($3759), so you'll be taxed $4,786.5. Deduct this from $41,600, and you are left with $36,813.5.
Also, something to consider is that $41,600 falls at the upper limit of the 12% tax bracket, and as taxes are adjusted every year to account for inflation, this means you may end up in the next tax bracket when filing your tax return from the 2022 year, which would rise to 22%, greatly lowering the net income you'd receive!
Unfortunately, taxes don't stop there, and you'll also have to pay State tax and local taxes, which depending on how much you make per year, vastly differ by jurisdiction, from 0% to 13.30%, and can also dramatically alter the net value you'll receive.
Assuming you're starting at entry level, here’s a list of jobs that pay $20 per hour.
To make more than $20 per hour, you'll most likely need some training to take on the role. Here's a list of jobs that pay more than $20 per hour.